TOWN hall chiefs will learn today how much extra cash they will get from the government - to avoid increases in council tax bills of up to 10 per cent.

In his pre-budget report to the Commons, Gordon Brown will give his verdict on a plea by local government for an extra three per cent to help reduce a £2bn funding gap.

The Chancellor is also likely to admit that the British economy is slowing down. In the last Budget he predicted growth of three to 3.5 per cent but two per cent may be more realistic. Mr Brown is also expected to set out measures to boost house building and help first time buyers take part ownership of their homes.

Mr Brown has been locked in talks with town hall chiefs after the Local Government Association predicted bills could rise by 10 per cent next year without more government funding. This could mean an extra £100 a year for average council taxpayers.

Progress

A spokesman at the Office of the Deputy Prime Minister said the LGA "cries wolf" every year.

The local government minister Phil Woolas, MP for Oldham East and Saddleworth, warned that the government would use "capping" powers on council spending to keep bills down.

But in advance of Mr Brown's Commons statement today, the chairman of the Local Government Association, Sir Sandy Bruce-Lockhart, said they had made progress in talks with the government.

Sir Sandy said: "We have simply been saying that council leaders have a real determination to keep council tax down and the Treasury has acknowledged that figures show local government has been delivering more efficiency savings than any other part of the public sector.

"The government had offered a 1.5 per cent increase to councils - that really needs to rise to three per cent for all authorities simply to pay for pay and price inflation," he added. Sir Sandy said that some ministers had accepted that new laws imposed by the government brought extra burdens to town halls, including the new licensing act, asylum, EU waste directives, as well as the pension issues.

"The most important thing is that we get this money for two years so we don't have this business of having a row every single year about whose fault it is," added Sir Sandy.

In his Commons statement Mr Brown is expected to set out plans to promote house building and home ownership, including a levy on land owners to encourage them to release land more quickly for building.

'Unaffordable'

There will also be more details of a plan to allow first time buyers to purchase a 75 per cent share of properties, with the government and mortgage lenders taking the rest.

The row over Lord Turner's pensions report, which called for an increased state pension and rises in the retirement age, may also surface. Mr Brown's aids say the proposals are "unaffordable".

The Institute of Directors has accused the government of living beyond its means and says public spending growth should be restricted to 1.5 per cent a year until 2011.

The Director General of the IOD, Miles Templeman, said: "The warm glow the economy has given off over the past decade will soon begin to cool."